Bills Digest no. 122 2007–08
Judiciary Amendment Bill 2008
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Judiciary Amendment Bill
2008
Date
introduced: 28 May 2008
House: House of Representatives
Portfolio: Attorney-General
Commencement:
On the day after it
receives Royal Assent
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Bill seeks to amend section
79 of the Judiciary Act 1903 (Cth) (the Judiciary Act) to
provide that a State or Territory law (which limits the recovery of
invalidly imposed State or Territory taxes) that would otherwise
apply to a suit if it did not involve federal jurisdiction is
binding on a court exercising federal jurisdiction in the relevant
State or Territory.
Section 79 of the Judiciary Act currently provides that, except
as otherwise provided by the Constitution or Commonwealth laws, the
laws of a State or Territory are binding on all courts exercising
federal jurisdiction in that State or Territory. The exact terms of
section 79 are as follows:
The laws of each State or Territory, including
the laws relating to procedure, evidence, and the competency of
witnesses, shall, except as otherwise provided by the Constitution
or the laws of the Commonwealth, be binding on all Courts
exercising federal jurisdiction in that State or Territory in all
cases to which they are applicable.
The Bill seeks to rename that provision as subsection
79(1). It then seeks to insert proposed
subsections 79(2) (4), which deal specifically with
limitations on actions brought in a State or Territory court
exercising federal jurisdiction to recover taxes raised invalidly
under a State or Territory law.
The Bill assists in restoring the states and territories to the
position they were in before the decision of the High Court of
Australia in British American Tobacco v Western Australia
(2003) 217 CLR 30 (BAT v WA).[1] In short, the High Court found that
State laws imposing conditions on the right to sue the State
Government did not apply where the State court was exercising
federal jurisdiction, because the provisions were inconsistent with
Commonwealth law, particularly sections 39 and 64 of the Judiciary
Act. The decision in BAT v WA is discussed further
below.
The proposed amendments to section 79 of the Judiciary Act
contained in the Bill make clear that State and Territory laws
which apply to the recovery of invalidly imposed State or Territory
taxes (including the imposition of conditions on the right to bring
an action) are binding where the proceedings are in federal
jurisdiction.
The decision of the High Court of
Australia in British American Tobacco v Western Australia
(2003) 217 CLR 30
The decision of the High Court in BAT v WA concerned a
claim made by a tobacco wholesaler against the Government of
Western Australia (the Crown) to recover licence fees paid under
the Business Franchise (Tobacco) Act 1975 (WA). The claim
was brought under the Crown Suits Act 1947 (WA) (the WA
Act) after the decision of the High Court in Ha v New South
Wales (1997) 189 CLR 465, where the Court found that fees
imposed under a similar law in NSW were excise duties and thus that
they had been imposed in contravention of section 90 of the
Commonwealth Constitution.[2]
At the time, section 6 of the WA Act stated that no right of
action lay against the Crown unless (a) the party proposing to take
action gives written notice to the Crown Solicitor advising of
certain information within 3 months of the action accruing or as
soon as practicable (whichever period is longer), and (b) the
action is commenced within one year of the action accruing. (The
provision has since been repealed.) In this case, it was common
ground that the action accrued on 5 August 1997, when judgment was
delivered in Ha v New South Wales. However, written notice
was not given under subsection 6(1) of the WA Act until some 10
months after the relevant payment was made. It was also common
ground that the proceedings were in federal jurisdiction, conferred
on the Supreme Court of Western Australia by subsection 39(2) of
the Judiciary Act. Section 39 is as follows:
(1) The jurisdiction of the High Court, so far
as it is not exclusive of the jurisdiction of any Court of a State
by virtue of section 38, shall be exclusive of the jurisdiction of
the several Courts of the States, except as provided in this
section.
(2) The several Courts of the States shall
within the limits of their several jurisdictions, whether such
limits are as to locality, subject-matter, or otherwise, be
invested with federal jurisdiction, in all matters in which the
High Court has original jurisdiction or in which original
jurisdiction can be conferred upon it, except as provided in
section 38, and subject to the following conditions and
restrictions:
(a) A decision of a Court of a State, whether
in original or in appellate jurisdiction, shall not be subject to
appeal to Her Majesty in Council, whether by special leave or
otherwise.
(c) The High Court may grant special leave to
appeal to the High Court from any decision of any Court or Judge of
a State notwithstanding that the law of the State may prohibit any
appeal from such Court or Judge.
In BAT v WA, the High Court found that a law such as
section 39 of the Judiciary Act is an exercise of power under
section 78 of the Constitution. The majority (McHugh, Gummow and
Hayne JJ, with Callinan J agreeing) held that the conferring of
jurisdiction with respect to a matter arising under the
Constitution (or involving its interpretation) under section 39(2)
of the Judiciary Act involves the conferral of any necessary right
to proceed against a State as a party in the matter. Their Honours
found that section 39(2) of the Judiciary Act otherwise provided
for the purposes of that Act, and concluded that the Supreme Court
had federal jurisdiction because of section 39(2), supported by
section 77(iii) of the Constitution. They also found that section
79 of the Judiciary Act did not make subsection 6(1) of the WA
Act applicable in federal jurisdiction. In practical terms, this
means that the limitation period and the notice provision in
subsection 6(1) of the WA Act were not binding on the Supreme Court
exercising federal jurisdiction in the case.
The Court also held that the limitation period in paragraph
6(1)(b) of the WA Act, which applied only to actions against the
Crown, was invalid because it was inconsistent with section 64 of
the Judiciary Act. Section 64 provides:
In any suit to which the Commonwealth or a
State is a party, the rights of parties shall as nearly as possible
be the same, and judgment may be given and costs awarded on either
side, as in a suit between subject and subject.
In the event, the High Court allowed the company s appeal with
costs. In doing so, it set aside certain orders made by the Full
Court of the Supreme Court of Western Australia (which had given
summary judgment in favour of the Crown on the basis that the
company had not complied with subsection 6(1) of the Crown
Suits Act 1947 (WA)), and also dismissed the company s appeal
to the Full Court of the Supreme Court with costs.
It should be noted that the taxes paid by British American
Tobacco were in fact found by the High Court to have been
invalidly imposed by the Western Australian Government. It
would seem reasonable that the company should have the right to
recover moneys from the Western Australian (or other relevant
State) Government. It remains a matter for speculation if that
right should be diminished because the company received some
benefit from having paid the fee/tax (for example, in the form of
revenue from tobacco sales, where the price of the tobacco product
paid by the consumer presumably included an amount to cover the
cost of the fee paid by the company to the Government),
notwithstanding the fact that the fee was invalidly imposed.
In a Press Release dated 28 May 2008, the Attorney-General, Mr
Robert McClelland MP, stated that the Bill is a clear example of
the Rudd Government cooperating closely with the States and
Territories to achieve progress for the nation .[3] Similarly, Mr McClelland said that
the Bill is an example of the Rudd Labor government s commitment to
cooperative federalism , claiming that:
This is a matter that has long languished on
the books of the Standing Committee of Attorneys-General for over
four years because of the previous government declining to act for
political reasons completely unrelated to the substance of the
proposed legislation.
While Mr McClelland s statement is cryptic, it may be that he
was referring to the fact that the Howard Coalition Government
received substantial campaign funds in 2006 07 from British
American Tobacco.[4]
Arguably, British American Tobacco (and similar organisations)
would have been unhappy if the Howard Government had acted to
remedy the effects of the High Court decision in BAT v
WA.
In introducing the Bill, the Attorney-General also referred to
the fact that it implements recommendations of the Standing
Committee of Attorneys-General (SCAG) which have as their objective
the protection of state and territory revenue , saying:
It is desirable that there be a special, short
limitation period applicable to proceedings to recover invalid
state and territory taxes. Otherwise, claims could be made many
years after a tax has been paid, with potentially far-reaching
consequences for government budgeting.[5]
Mr McClelland also referred to the fact that all the States and
Territories have special limitation periods with respect to the
recovery of taxes paid under a mistake of fact or law, including
constitutionally invalid taxes .[6] These limitation periods range from 6 to 12 months
from the date of the payment of the tax.[7]
There has been no press commentary on the Bill. Also, there is
no apparent mention of it on any website of any political party, or
on the website of companies such as British American Tobacco
Australia. Perhaps this is not completely surprising, given the
nature of the Bill and the fact it has the support of SCAG.
According to the Explanatory Memorandum for the Bill, the
amendments are not expected to have any significant financial
impact .[8] The Bill
may have financial implications for the budgets of State
Governments but to a large extent that is in their own hands, given
they bear the ultimate financial responsibility for imposing valid
taxes. Also, as mentioned above, the Bill ensures that claims must
be made 6 12 months from the date of payment of the invalid tax,
which limitation gives the State and Territory Governments some
certainty and protection.
Item 2 of Schedule 1 seeks to insert
proposed subsections 79(2) (4) into the Judiciary
Act. These provisions would override the effect of the decision in
BAT v WA.
Proposed subsection 79(2) expressly states that
a provision of the Judiciary Act does not prevent a State or
Territory law (of the sort mentioned in proposed subsection
79(3)) from binding the Crown in relation to a suit
involving federal jurisdiction that relates to the recovery of an
amount paid in connection with a tax that was invalidly imposed
under State or Territory law.
This provision is intended to overcome the difficulties with the
operation of section 79 identified in BAT v WA.[9] Particularly it overcomes
the fact that if section 79 does not refer to a right to proceed,
it may then be inconsistent with subsection 39(2) which implicitly
confers a right to proceed. Similarly, any limitation on the right
to proceed will not be picked up by section 79 in its current
terms.
Proposed subsection 79(3) states that the types
of State or Territory law that would apply to a suit if it did not
involve federal jurisdiction include a law that:
- limits the period for bringing the suit to recover the
amount
- requires notice to be given, and
- bars the suit on the ground that the person bringing the suit
has charged someone else for the amount.
Proposed subsection 79(4) provides some
examples of an amount paid in connection with a tax (being a phrase
used in proposed subsection 79(2)), including:
(a) an amount paid as the
tax;
(b) an amount of penalty for
failure to pay the tax on time;
(c) an amount of penalty for
failure to pay enough of the tax;
(d) an amount that is paid to a
taxpayer by a customer of the taxpayer and is directly referable to
the taxpayer s liability to the tax in connection with the taxpayer
s dealings with the customer.
Thus, it is clear that the provisions are intended to cover not
only taxes paid but invalidly imposed, but also penalties for the
late payment (or non-payment) of those taxes. The provisions also
cover the situation where the taxpayer has already recovered the
amount from a third party (such as a consumer of the taxpayer s
goods or services).
The proposed amendments are not intended to have retrospective
operation. Item 3 of Schedule 1 states that the
amendments apply in relation to the recovery of amounts paid after
the commencement of this Schedule . As mentioned above, the Act
(and thus the Schedule) is intended to commence on the day after
Royal Assent.
The decision in BAT v WA was handed down on 2 September
2003. The Howard Government made no obvious attempt to counteract
the effect of the decision in its third or fourth terms of
government. The Bill has now been introduced by the Rudd
Government, not only with the support of SCAG, but particularly to
implement recommendations by SCAG designed to protect State and
Territory revenue. SCAG is a co-operative body of Commonwealth,
State and Territory Attorneys-General, whose members are all of
Labor Party affiliation at present.
The amendments overcome much of the uncertainty that resounds in
the individual judgments of members of the High Court in BAT v
WA, especially in relation to the operation in federal
jurisdiction of State or Territory provisions dealing with
limitation requirements and the contemporaneous operation of
relevant Commonwealth law, particularly the Judiciary Act. The
amendments make clear the types of State or Territory law that will
apply to suits heard in State or Territory courts exercising
federal jurisdiction, while leaving open the possibility that other
State laws may operate in federal jurisdiction as well. This
scenario gives certainty, but also allows scope for the operation
of State laws which either are not assumed to be relevant (or
apply) at the present time or which may come into being in the
future.
Morag Donaldson
4 June 2008
Bills Digest Service
Parliamentary Library
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